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Anatole Kaletsky is Chief Economist and Co-Chairman of Gavekal Dragonomics. A former columnist at the Times of London, the International New York Times and the Financial Times, he is the author of Capitalism 4.0, The Birth of a New Economy, which anticipated many of the post-crisis transformations of the global economy. His 1985 book, Costs of Default, became an influential primer for Latin American and Asian governments negotiating debt defaults and restructurings with banks and the IMF.

The increase in the price of oil in physical markets during May had nothing to do with the reimposition of sanctions on Iran. Instead, legal action by ConocoPhillips which froze Venezuela’s assets in three formerly Dutch colonies in the Carian including Curacao effectively cut that nation’s export capacity by 50 percept and removed 500 thousand barrels a day from the world oil market. The action began the same day that the US action on Iran was announced.

Sadly, the foreign policy establishment is so focused on the Middle East and North Korea that major actions which may soon eliminate all exports from Venezuela are going unnoticed. The ConocoPhillips seizure was authorized by a Tribunal in Paris and is fully legal. Still it amounts to foreign policy by a private company.

Anatole Kaletsky says the sanctions that Trump reimposed against Iran do raise uncertainty for geopolitics in the Middle East and the global economy, which are interlinked. The immediate concern is whether Trump’s reckless withdrawal from the Joint Comprehensive Plan of Action (JCPOA) would further destabilise the Middle East, as it could spark a nuclear arms race, despite Trump’s naive assurance that the world would be a “safer” place. The author seeks to figure out whether the “US efforts to compel foreign companies to observe its sanctions against Iran prove as tough as Trump’s belligerent rhetoric.” One year in office, Trump’s clueless foreign policy – from the North American Free Trade Agreement, the Trans-Pacific Partnership trade pact and the Paris climate deal to the North Korean nuclear issue and the Syrian civil war – has been summed up as “loud thunder but little rain” by Hua Liming, a former Chinese ambassador to Iran. Although the 2003 invasion of Iraq had taught the world “one indisputable lesson,” few seem to have learnt from the vagaries of a war. It comes as no surprise that “nobody in the White House, the CIA, Mossad, or the Saudi intelligence services has a clue as to what might happen next.” But history shows that a conflict in the Middle East has often proved multi-layered, involving a number of intractable actors from the region and beyond. A US-Iran confrontation would most likely unfold on the economic front. The author says “the real extent of sanctions enforcement will not be clear until the late stages of the six-month ‘wind-down period’ provided by the new US regulations for businesses to disengage from Iran.” Yet much could still happen within the coming months. Meanwhile China, Russia and the EU consider countermeasures to neutralise the US effect of sanctions on any non-US firm that continues to do business with Iran.Stock markets closed higher as the oil price topped $80 a barrel for the first time since November 2014. The market is increasingly concerned that the Trump administration's effort to sanction Iran's oil exports could be more successful than originally thought. But the author says, “predictions viewed by investors as completely obvious often turn out to be wrong. The outlook for oil prices could turn out to be such a case.”Indeed, many question the effectiveness of the sanctions, largely because China and key US allies in Europe still support the nuclear deal. The EU is exploring ways to protect its companies, but the market is losing faith that Washington will issue sanctions waivers to shippers, insurers and financial institutions necessary to bring Iranian oil to Europe. However the EU could switch to Euros in its oil trade with Iran, instead of paying in US dollars.China, India and Turkey – major importers of Iranian oil – “are likely to ignore or circumvent sanctions.” While US allies are expected to reduce their oil purchase from Iran, China will take advantage of the demand gap left by South Korea and Japan and buy more of Iranian oil. Chinese state-owned refiners will capitalise on the opportunity and buy an abundant supply from Iran oil at possibly attractive prices. While Russia and Saudi Arabia benefit from Trump’s sanctions against Iran, that lead to a surge in oil prices, critics say, China’s purchase of Iranian oil could also pit Iran against regional rival Saudi Arabia and Russiam for market share in China, the world’s largest oil importer. Iran, for its part, will likely seek to gain a bigger piece of the Chinese pie, since Saudi Arabia has recently raised the official selling price (OSP) of its oil to Asia, a move that has prompted China to cut its Saudi imports. The author says Trump has also an incentive to keep oil prices down ahead of the mid-term elections, fearing sharp increases would alienate voters. While Saudi Arabia could help Trump out, by increasing its output, Iran and Russia, “which had previously been less hawkish than Saudi Arabia about OPEC pricing, might now support tougher supply restraints, precisely because a sharp rise in oil prices could cause a punishing backlash against Trump.” It would certainly be a sweet revenge on a spoiler like him.